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Exam 6: Individual Deductions

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Question 61

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Don's personal auto was damaged in a wind storm this year. Don purchased the auto several years ago for $32,000 and it was worth $18,000 at the time of the storm. The damage was superficial, so Don decided not to repair the car. Although Don collected $750 from his insurance company, the value of the car dropped after the storm to $15,000. What is the amount of casualty loss from the storm damage before Don applies any floor limitations?

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Question 62

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Erika (age 67) was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: Hospital charges $\quad\quad\quad\quad\quad\quad\quad\$ 3,280$ Prescription medicine $\quad\quad\quad\quad\quad\quad\quad510$ Doctor's fees $\quad\quad\quad\quad\quad\quad\quad\quad\quad1,240$ In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?

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$2,630 consisting of...

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Question 63

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Which of the following is a true statement?

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Which of the following is a true statement?

Homer is an executive who is paid a salary of $80,000. Homer also paints landscapes as a hobby. This year Homer expects to sell paintings for a total of $750 and incur the following expenses associated with his painting activities: $\begin{array} { l r } \text { Travel } & \$ 1,480 \\\text { Paints and canvas } & 610 \\\text { Painting classes } & 230\end{array}$ What is the effect of Homer's hobby on his taxable income? Assume his AGI does not reflect his painting activities and that he itemizes deductions but has no other miscellaneous itemized deductions.

Chuck has AGI of $70,000 and has made the following payments $\begin{array} { l r } \text { State income tax withholding } & \$ 1,900 \\\text { State income tax estimated payments } & 850 \\\text { Federal income tax withholding } & 7,100 \\\text { Social Security tax withheld from wages } & 4,800 \\\text { State excise tax on liquor } & 400 \\\text { State inheritance tax } & 1,200 \\\text { County real estate tax } & 790 \\\text { School district tax on realty } & 510\end{array}$ Calculate the amount of taxes that Chuck can include with his itemized deductions.

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because:

Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan.

In general, taxpayers are allowed to deduct the fair market value of capital gain property on the date of the donation to a qualified charitable organization.

Bunching itemized deductions is one form of tax evasion.

This fall Manfred enrolled in the law school at State University (a qualified educational institution) and paid $6,200 in tuition. Until his enrollment Manfred worked as a stock broker and this year he reports $70,000 in wages. If Manfred files single and reports no other items of income or expense how much of the tuition can he deduct as a business expense?